How is AI Being Used in the Loans Industry in the UK?

Artificial Intelligence (AI) is changing how the loans industry works in the UK by helping lenders make faster decisions, offer better service, and improve how they deal with customers who are struggling to repay. From customer service chatbots to smarter collections, AI is becoming a key part of how loans are given and managed.

Chatbots for Customer Service

AI-powered chatbots are now a common part of many UK loan companies’ websites. These bots can answer customer questions at any time of day, helping people check their loan status, understand terms and conditions, or make changes to their account. Unlike human agents, chatbots don’t need breaks or shifts. This means customers can get help instantly, even outside normal business hours.

AI chatbots are also improving over time. They learn from the questions they are asked and become better at giving clear answers. According to a 2024 report by the Financial Conduct Authority (FCA), over 60% of loan customers in the UK now prefer using online chat services over phone calls. Chatbots help reduce wait times and free up human staff to handle more complex issues.

Using AI To Understand Behaviour and Site Use

AI is also used to understand how people behave on loan websites. It can track how long a person stays on a page, where they click, how often they visit, and whether they complete their application or not. This data helps lenders understand who is likely to apply for a same day loan, who might drop off, and even who might be a risky customer.

For example, someone who visits the loan calculator multiple times, but never submits an application, may be unsure or comparing lenders. On the other hand, someone who quickly fills in forms and uploads documents without hesitation might be more confident and financially stable. AI uses these patterns to help lenders decide who is a good fit for a loan and how to guide others through the process.

Smarter Underwriting Decisions

Traditionally, underwriting involved looking at a person’s credit score, income, and employment history. Now, AI can analyse many more data points. It learns from past customers to understand what traits lead to on-time repayments or defaults. AI models can spot small signs of risk or reliability that humans might miss.

This means lenders can approve more people fairly, even if they have limited credit history. At the same time, they can avoid lending to people who are likely to struggle with repayments. A 2023 study from UK Finance showed that AI-driven underwriting reduced default rates by up to 25% among short-term loan providers.

AI in Loan Collections

When customers fall behind on payments, lenders must follow strict rules about how and when they contact them. AI helps with this by planning follow-ups by email, text message, phone, or letter. It ensures the company stays within legal limits while still trying to get a response.

AI can also test which email subject lines or message styles get the best results. For example, some customers may respond better to friendly reminders, while others react more to firm, serious language. The system learns which messages lead to repayments and uses this to improve future follow-ups.

AI ensures that no customer is contacted too often or too little, and that the messages sent are likely to lead to action. This not only helps short term lenders get their money back, but also treats customers fairly during what can be a stressful time.

Conclusion

AI is already changing the way loans are offered and managed in the UK. From chatbots helping customers around the clock to smarter underwriting and respectful collections, AI is helping lenders work more efficiently and fairly. As technology continues to improve, AI will play an even bigger role in the future of finance.